Treasury Secretary Janet Yellen on Thursday questioned the efficacy of a European ban on Russian oil and gas imports, warning that it could have unintended economic consequences for the U.S. and its Western allies.
Speaking to reporters following a meeting with Ukrainian Prime Minister Denys Shmyhal and Finance Minister Sergii Marchenko in Washington, Yellen cautioned that an all-out embargo on Russian energy could ultimately cause more harm than good.
"Europe clearly needs to reduce its dependence on Russia with respect to energy, but we need to be careful when we think about a complete European ban on, say, oil imports," Yellen said.
Europe is the biggest purchaser of Russian crude, importing about 138 million tons in 2020 out of Russia’s total exports of 260 million tons – or roughly 53%, according to the BP Statistical Review of World Energy. Russia supplies about one-quarter of Europe's oil needs.
European leaders are discussing possible sanctions on Russian oil, including a boycott, as they seek to further penalize the Kremlin for the Feb. 24 invasion of Ukraine.
Western allies have already cut off a key part of the Central Bank of Russia by preventing it from selling dollars, euros and other foreign currencies in its roughly $630 billion reserve stockpile; blocked certain financial institutions from the Swift messaging system for international payments; and sanctioned some of the Russian elites who have close ties to Putin.
The U.S. also ordered a ban on Russian oil imports – something that Yellen acknowledged will push energy prices higher.
But European imports of Russian oil are continuing to pad the Kremlin's coffers; between 2011 and 2020, for instance, Russia received an average of 43% of its revenue from oil and gas.
Should the EU move forward with its plans to reject Russian energy imports, European countries would almost certainly face much steeper prices for oil, coal and gas, Yellen argued. Although Russia would no longer sell such large volumes of crude to Europe, it could also find other customers in friendly or neutral countries that are willing to pay more for less.
"That would clearly raise global oil prices, it would have a damaging impact on Europe and on other parts of the world, and, counterintuitively, it could actually have very little negative impact on Russia, because although Russia might export less, the price it gets for its exports would go up," Yellen said.
Economists have been downgrading their forecasts for the year ahead as the outbreak of the worst European conflict in decades roils markets and threatens to push inflation even higher – in addition to creating a massive humanitarian crisis that has left thousands dead and millions displaced.